According to a report by payroll firm ADP on Wednesday, private hiring slowed sharply in November, a sign that the historically tight labor market may be losing some of its momentum.
Companies added just 127,000 jobs this month, a sharp drop from the 239,000 the company reported for October and well below the Dow Jones estimate of 190,000. It was also the lowest total since January 2021.
The relatively weak total is due to the Federal Reserve’s efforts to loosen up a job mix where there are still almost two open positions for every available worker. The central bank has raised interest rates six times this year, but the unemployment rate is still 3.7%, nearly its lowest level since 1969.
“Turning points in the labor market can be difficult to pinpoint, but our data suggests that the Federal Reserve’s tightening is having an impact on job creation and wage increases,” said Nela Richardson, ADP’s chief economist. “Furthermore, companies are no longer in hyper-replacement mode. Fewer people are quitting and the post-pandemic recovery is stabilizing.”
The ADP report comes two days before the Labor Department releases its more closely watched nonfarm payrolls. Economists polled by Dow Jones expect a 200k gain in this report after a 261k rise in October.
In the ADP report, by far the biggest sector gainer was leisure and hospitality, which posted an increase of 224k.
However, this was offset by losses in Manufacturing (-100k), Professional & Business Services (-77k), Financial Activities (-34k) and Information Services (-25k). Manufacturing industries saw an overall drop of 86,000 jobs, while service industries added a net 213,000.
Despite the shaky job numbers, salaries continued to rise.
Wages rose 7.6% from a year earlier, ADP said, although that was slightly slower than the 7.7% reported for October.
From a size standpoint, all job creation comes from companies employing 50-499 workers, a sector that has created 246,000 jobs. Small businesses lost 51,000 while large businesses lost 68,000.
Correction: Companies added 127,000 jobs for the month, the lowest total since January 2021. A previous version got the timing wrong.